DEFINITION of 'Bank Of Canada - BOC'
The Bank of Canada was established in 1934 under the Bank of Canada Act. The Act stated the Bank of Canada was created “to promote the economic and financial welfare of Canada.” The Bank of Canada and its governor are responsible for issues such as setting monetary policies, printing money and determining the interest rate of Canadian banks.
BREAKING DOWN 'Bank Of Canada - BOC'
It was Canada’s Prime Minister William Lyon Mackenzie King who officially signed the Bank of Canada Act into law. In 1938, the Bank of Canada was legally designated as a federal crown corporation. Prior to the signing of the law, Canada’s largest bank, the Bank of Montreal, acted as the government’s banker.
The Bank of Canada governor resides over the Bank of Canada as the person responsible for many of the bank’s duties. The first governor, Graham F. Towers, served for 20 years. There is a term limit of seven years for the Bank of Canada’s governor. The election is made by the board of directors. Governor Stephen Poloz has served since 2013 and is the bank’s ninth governor. The members of the board of directors are appointed by Canada's Minister of Finance for three-year terms.
The Bank of Canada and the governor are responsible for items like setting monetary policies, printing money and determining the interest rate of Canadian banks. Setting the interest rate is one of the most important roles of the bank. The interest rate is decide eight times a year. Back in 2007, the interest rate stood above 4% before being lowered over time to the 1% mark in 2010. The rate was cut twice in 2015 to the current 0.5% level. This rate is the interest charged when banks lend money to each other. Rate cuts are typically done to boost the economy.
Creating the national currency for Canada is another important task of the Bank of Canada. The governor works on making money that is difficult to be counterfeited and has an authentication process in place. Canada contracts the printing of money to an outside printing company. The governor’s name can be found as a printed signature on all Canadian paper money.
The Bank of Canada can be found at 234 Wellington Street in the city of Ottawa. This is where the bank has operated since 1980, its final of several building moves. Regional Bank of Canada offices are also present in Vancouver, Calgary, Toronto, Montreal, and Halifax.